Economic Development Tools • TIF: Tax Increment Financing • CID: Community Improvement District
• TDD: Transportation Development District • Chapter 100 Tax Abatement • Chapter 353 Tax Abatement
Tax Increment Financing Potential Incentives: Tax Reallocation • Incremental increases in property and sales taxes can be “captured” and applied to development costs • Revenues may be captured for 23 years after TIF is activated
• Public and/or Private costs may be paid with collections
Tax Increment Financing How it works: • Requires a blight finding • Property Value Base is Frozen: • •
Base value property tax still paid to taxing jurisdictions Increase in property tax is captured as “PILOTS” or payments in lieu of tax and applied to project costs
• Sales Tax Base is Frozen: • •
•
Base amount of sales tax paid to to taxing jurisdictions 50% of increase in sales tax is captured as “EATS” or economic activity taxes and applied to project costs Other 50% of increase in sales tax is paid to taxing jurisdictions
Community Improvement District Potential Incentives: Tax Addition • Additional taxes within District can be used to pay for any public improvement or for the demolition, removal, renovation, reconstruction or rehabilitation of privately owned buildings or structures: • • •
Sales tax – up to 1.0% Special assessments Real property tax
Community Improvement District CID Bonds: • Maximum maturity of 20 years, if issued by CID directly • Payable from collections of funding method imposed
Transportation Development District Potential Incentives: • Additional taxes within District can be used to pay for any transportation-related public improvement: • • • •
Sales tax – up to 1.0% Special assessments Real property tax – up to 10¢ on $100 of assessed valuation Toll roads or user fees for project
Transportation Development District TDD Bonds: • Maximum maturity of 40 years • Payable from collections of funding method imposed
Chapter 100 Tax Abatement Potential Incentives: • • • •
Real Property Tax Abatement – 0% - 100% Personal Property Tax Abatement – 0% - 100% Sales Tax Exemption on Construction Materials Sales Tax Exemption on Equipment / Machinery (if DED approves)
Chapter 100 Tax Abatement How it works: • • • • •
Land owned by Company is transferred to City, removing it from tax rolls Industrial Development Bonds are issued in an amount equal to the total value of the project City leases land and project back to Company City and company agree to schedule of Payments in Lieu of Taxes (PILOTS) to set abatement level City has no liability for bond payments.
Chapter 353 Tax Abatement Potential Incentives: •
Real Property Tax Abatement •
Up to 10 years: 100% abatement of all assessed valuation over land base
•
Up to 15 years after that: 50% abatement of land and improvements value
Chapter 353 Tax Abatement How it works: • • • •
Requires a blight finding Redevelopment Corporation (RC) is formed Completed project is transferred to RC, triggering abatement Subsequent owners receive abatement as long as property is maintained in accordance with original plan
Economic Development and Incentives Commission • • • •
Unique to City of Independence Made up of representatives of the City, County, School Districts and other Taxing Jurisdictions Holds hearings and makes recommendations to City Council on incentive requests Reviews all incentives discussed above except for TIF which has its own review process that is similar
Economic Development Policy •
Limits incentives to 20% of total project costs
•
Prevents new projects where City takes on risks of debt payments
•
Encourages projects that provide new value to taxing jurisdictions from the beginning • •
At least 15% initial PILOT for abatement transactions TIF must surplus 50% of PILOTS to taxing jurisdictions